Slowing lentil exports raise questions about carryout

Carryout forecasts diverge and India’s big crop clouds outlook for 2017-18 export demand

There is little doubt that 2016-17 lentil carryout will rise, but analysts disagree over how much it will increase or if it even matters.

Agriculture Canada sees 425,000 tonnes of carryout at the end of the year, up from 73,000 tonnes last year.

The February estimate is down substantially from the department’s January estimate of 625,000 tonnes.

The difference is due to an in-crease in its export forecast to 2.2 million tonnes, up from two million tonnes in January.

Stat Publishing analyst Brian Clancey believes Agriculture Canada’s January forecast is closer to the truth. He is forecasting 605,000 tonnes of carryout and a bearish 22 percent stocks-to-use ratio.

“It’s really simple, I don’t see where the extra demand is coming from,” he said.

“I don’t feel optimistic about demand from India, so you have to look at the rest of the world.”

A pulse crop exporter who re-quested anonymity said the final carryout number is irrelevant: it is the quality of those ending stocks that matter.

“The world markets see it as rubbish. The 2016 crop quality was rough at harvest and is not aging well and commercial exporters are dealing with quality complaints for what they are shipping,” he said in an email.

“I would argue (it) doesn’t matter what the carryout is — no one wants it and demand will be for new crop only.”

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Seventy percent of Canada’s lentils are typically exported between Aug. 1 and Dec. 31.

India bought 484,000 tonnes of lentils from Canada during that period in 2016, down from 762,000 tonnes the previous year, a 36 percent decline.

That is because India is expected to harvest its biggest pulse crop on record. The 2016-17 crop is forecast at 22.14 million tonnes, a 33 percent increase over the previous year.

Clancey said Canadian exports to Pakistan, Bangladesh and Sri Lanka have picked up some of the slack, but lentil exports for the first five months of the 2016-17 campaign are still 263,000 tonnes below last year’s pace, according to Statistics Canada.

Clancey doesn’t see that changing with all the uncertainty surrounding India.

India announced it will not extend an exemption expiring on March 31 that allows crop shipments to be fumigated with methyl bromide in India instead of the port of export.

That is problematic for Canadian exporters who can’t fumigate due to winter temperatures. Some have stopped shipping to India, while others are rerouting shipments to other countries.

The fact that India appears reluctant to budge on the methyl bromide issue tells Clancey the government is confident in its lofty pulse crop production forecast. He believes the country is done importing for the year.

Pulse production in India is expected to increase by 5.5 million tonnes over last year. That is worrisome considering it imported 4.6 million tonnes in 2015-16.

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Clancey said the numbers look frightening, but he is still forecasting a robust four million tonnes of pulse imports in 2016-17.

That is because demand is rising. G. Chandrashekhar, a global agribusiness and commodity sector specialist, recently provided some insight on what’s happening in a column he wrote for The Hindu BusinessLine.

Like Clancey, he is forecasting only a slight drop in pulse imports in India despite the 5.5 million tonne increase in production.

“India’s consumption demand for pulses is ravenous and far higher than what the policy-makers have been projecting,” said Chandrashekhar.

“One of the factors contributing to higher consumption demand could possibly be an increase in rural incomes following a near-normal southwest monsoon and rebound in farm output. Also, softening of food prices is encouraging consumption higher than what was seen in the previous two years.”

Prices are also softening in 
Canada. Clancey said the average export price for red lentils so far this year is 28 percent below last year.

The decline in green lentil prices is far less dramatic. The export price for large green lentils has fallen six percent compared to last year and the drop in small green prices is smaller.

Clancey said the supply of green lentils is tighter than reds, and extensive quality damage is leading to higher prices for the top grades. Shipments to India are down, but movement has been good into Europe and the Americas.

He is forecasting a 700,000 acre, or 16 percent, decline in red lentil acres and a 100,000 acre, or seven percent, drop in green lentil acres in 2017.

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